Thursday, October 14, 2010

Invasion Handwriting is on the Wal-Mart

Wal-Mart is getting as serious as a heart attack about wanting to penetrate the urban market. The WSJ reports: "Wal-Mart Stores Inc. is planning to open dozens of small stores in the nation's cities, in an effort to push back against the dollar chains and other competitors nibbling at its customers. The prospect of Wal-Mart stores dotting America's biggest cities would change the urban landscape and the profile of the world's largest retailer, known for its blocky suburban edifices stocked with low-cost goods. The new stores, roughly a quarter to a third the size of a supercenter, largely will sell groceries."

And right on cue, the Chicago Sun Times tells us: "Wal-Mart’s U.S. CEO Bill Simon confirmed Wednesday that his company sees Chicago as a prime market to grow and plans to open 24 new stores of three different sizes...Wal-Mart also wants to open so-called Neighborhood Markets, which measure between 30,000 and 60,000 square feet. Finally, Simon wants to open smaller stores, which Simon didn’t describe, but analysts have said will likely measure 10,000 square feet."

Be very scared if you are a small store operator in NYC-whether food or general merchandise; because, as the Chicago Wal-Mart impact study showed: "What does the study tell us about the mega store's impact? Here it is: "The opening of a Wal-Mart on the West Side of Chicago in 2006 led to the closure of about one-quarter of the businesses within a four-mile radius, according to this study by researchers at Loyola University. They tracked 306 businesses, checking their status before Wal-Mart opened and one and two years after it opened. More than half were also surveyed by phone about employees, work hours, and wages. By the second year, 82 of the businesses had closed. Businesses within close proximity of Wal-Mart had a 40 percent chance of closing."

So the jobs argument is a canard-as the Wal-Mart economies of scale actually reduce employment rather than add to the job roles. And what about minority entrepreneurship? So many of the NYC food store and small general merchandise stores are minority owned-and the Walmonster will blow these operators right off of their fragile perch.

And an invasion it will be-as the WSJ points out: "Mr. Simon said he believes there is room for "hundreds" of small Wal-Mart stores in the U.S., offering food and consumer staples. The retailer first will test their urban appeal with 30 to 40 stores over the next few years before a full-scale launch."

The reasoning? Falling sales-with cities like Chicago and NY being the retailer's final frontier: "Sales have fallen for five consecutive quarters at Wal-Mart U.S. stores open at least a year, a key benchmark for retail businesses. The company's U.S. store growth has also stalled as it has begun running out of rural and suburban markets for its warehouse-sized supercenter stores, leaving large cities such as New York, Chicago and Los Angeles as the company's last frontiers for domestic expansion."

Wal-mart has also gotten a lot smarter-and is crafting health care and environmental policies to appeal to those progressives that have seen the company as an evil giant: "Wal-Mart has made a push to show it is a socially responsible giant; it now, for instance, offers better health benefits than most of its retail rivals, and is requiring suppliers to limit their carbon emissions. Yet Wal-Mart has struggled at cracking the big cities amid stiff opposition from organized labor—even as its archrival, Target Corp., and other big-box chains such as Best Buy Co. make a steady march into urban areas with similar products, stores and nonunion workers."

The NY Times underscores this calculated leftward lurch-chronicling the local produce push of the company: "Wal-Mart Stores announced a program on Thursday that would focus on sustainable agriculture among its suppliers, as the retail giant tries to expand its efforts to improve environmental efficiency among its suppliers. The program is intended to put more locally grown food in Wal-Mart stores in the United States, invest in training and infrastructure for small and medium-sized farmers particularly in emerging markets and begin to measure the efficiency of large suppliers in growing and getting their produce to market."

Can we get a Kumbaya? And the response on the left side of the plate is a good one: "“This is huge,” said Michelle Mauthe Harvey, project manager for the corporate partnerships program at Environmental Defense Fund. “Once people are asked those questions, if they haven’t been measuring, they measure more. Knowing what’s embedded in the food before it ever leaves the farm is really significant, because then you can begin to embrace better practices, you can begin to identify opportunities for improvement.”

So the new Wal-Mart is both armed and dangerous in its expansionism-and it will take a united effort on the part of all of the stakeholders-both business and labor-to hold back the mongol horde. But make no mistake about it NYC, as the WSJ reports, is the juicy target of the Wal-Mart expansion: "Mr. Simon would not specify which cities Wal-Mart wants to enter, replying, "Yes. All of that," when asked whether coastal cities such as California's were a possibility. But he joked that he had liked the musical selections during a dinner the prior evening, which included "New York, New York" being sung by a choir of Wal-Mart workers. Wal-Mart currently has no stores in the Big Apple."